Section 86 — Bankruptcy Act 1966 (Cth)

(1) Subject to this section, where there have been mutual credits, mutual debts or other mutual dealings between a person who has become a bankrupt and a person claiming to prove a debt in the bankruptcy:

(a) an account shall be taken of what is due from the one party to the other in respect of those mutual dealings;

(b) the sum due from the one party shall be set off against any sum due from the other party; and

(c) only the balance of the account may be claimed in the bankruptcy, or is payable to the trustee in the bankruptcy, as the case may be.

(2) A person is not entitled under this section to claim the benefit of a set‑off if, at the time of giving credit to the person who has become a bankrupt or at the time of receiving credit from that person, he or she had notice of an available act of bankruptcy committed by that person.

Related sections

• s 83 — Debt not to be considered proved until admitted
• s 84 — Manner of proving debts
• s 85 — Proof by employees
• s 87 — Deduction of discounts
• s 88 — Apportionment to principal and interest of payments made before bankruptcy
• s 89 — Apportionment where security realized before or after bankruptcy

Research how courts apply s 86

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